Supply Chain Thoughts

Companies choose to work with a third party logistics (3PL) provider for a variety of reasons, but primarily because the 3PL can do the job more effectively than they could do it themselves. Speed of service, customer satisfaction, capabilities, technology and cost all play a role. So how do your customers decide which 3PL is the best for their business? And how do you stack up? Inbound Logistics magazine gives these guidelines for assessing a 3PL’s performance:

1.      Control - 3PLs generally control transportation and distribution capacity. But customers need to exert control, as well. One of the most common reasons 3PL partnerships fail is poorly defined expectations. Outsourcers need to assertively communicate objectives and concerns, and constantly benchmark key performance indicators (KPIs) that are most important to them—not their service provider.

2.      Optimization - One way 3PLs create value is by helping customers optimize existing transportation and logistics functions. They do so by collecting and distilling mass amounts of data to granular-level detail, analyzing it, and identifying anomalies and redundancies. With so much change and variability in the supply chain, optimization is a recurring process.

3.      Reporting - Reporting is the key to understanding and recognizing 3PL performance, good or bad. Knowing where goods are in real time is an important part of this process, and 3PLs should provide shipment visibility and process information.

Customers need to dictate which status reports are most critical to their needs so they can view performance as it relates to their terms, not the service provider's. Using the right metrics may help companies determine if they are striking the right balance between service and cost.

4.      Execution - 3PLs should strive for continuous improvement—and customers should expect it. If a service provider is responsive to customer priorities—whether it's controlling specific KPIs, optimizing functions, or reporting data—and executes according to plan, there should be obvious gains in terms of customer service, efficiency, cost savings, and innovation.

Source: Inbound Logistics